THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

PIERS MORGAN, HOST: Tonight, roaring back, stocks soar 400 points. But are we out of the woods yet? I'll ask the experts what it means for you and your money.

Also, Barney Frank and what he said is really to blame for America's downgrade.

And (INAUDIBLE) of American business, T. Boone Pickens on where America goes from here.

So, how bad is all of this for President Obama? I'll ask the man who started covering the White House from the Kennedy years. Dan Rather. Does he ever seen Washington or Wall Street like this?

And anarchy in the U.K. Who and what is really behind the days and nights of rage in London and other U.K. cities. Where will it end?

This is PIERS MORGAN TONIGHT.

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MORGAN: Good evening, on a busy news day around the world.

Thousands of police on the streets of London and other U.K. major cities are finally getting the upper hand on the fourth night of the appalling violence there. We'll have the report from the scene in just a few minutes.

Meanwhile, on the other side of the world, Asian markets reacting to the day of wild gyrations, ending with the Dow up, that's right, up nearly 4 percent.

A crazy day in the market. At one stage, it looked like we're heading for yet another day of the Dow falling. And then the rally at the end ends up nearly 400 points plus up. What do you make of it all?

DIANE SWONK, CHIEF ECOMNOMIST, MESIROW FINANCIAL: Well, it was really, the financial markets were having a hard time figuring out exactly what the Fed said in a really unprecedented statement. There was a lot of information to digest. But essentially to distill it down, the financial markets figured out that Ben Bernanke, although with a bit of resistance from some of his colleagues within the FMC (ph), was going to stand by the statement the G-7 said and that was to do anything it could to shore up this economy and provide liquidity on the face of what happened in the last weeks. The economy is weaker than what they thought it was. The debt ceiling crisis dealt a blow to the U.S., and then the downgrade by S&P.

All of that, along with downward revisions to GDP sowing the U.S. economy almost stalled out. The Fed said we're just not going to let that happen.

And, finally, the financial markets, at the end of the day, once they read through everything, believed the Fed.

MORGAN: So, you had me curious. I was watching this whole thing unfold live, and certainly, the market's immediate reaction was pretty negative. So, what you're saying is that they waited to really grasp exactly what Ben Bernanke was saying and realized it may not be bad news.

SWONK: Exactly. They certainly said -- I mean, I think there was a bit of a shock of how much the Fed acknowledged that the economy was weak by saying in an unprecedented statement that they could keep interest rates at their zero target on the Fed funds rate until mid- 2013. They actually put a date on it. That's just not done by the Federal Reserve.

There were some members of the Federal Reserve that also dissented on that. I think we're all a little fatigued from the dissent and the debate in Washington. And there are some people that just weren't sure, does this mean more indecision.

But, frankly, Ben Bernanke has a pretty good record of corralling the cats within their own corral, and even when they're mountain lions within the Fed. He gets them to go where he wants them to go. And I think that's very important, the history.

And also, Ben Bernanke said, you know, we could do things with our balance sheet. We're still not done. We're not out of bullets yet.

And I think when all was said and done and financial markets finally digested this massive amount of news and unprecedented statement by the Feds, they said, you know what? Maybe that means we won't have a double dip recession now. We might not stall out. We'll still sputter along.

That's the bad news is we'll sputter along. It's also the good news. We're not going to stall out.

MORGAN: Leigh Gallagher, do you agree with this? Are we now avoiding the prospect of a double dip recession? Has the Fed run to the rescue here? Is Ben Bernanke, the hero cast of the hour? LEIGH GALLAGHER, ASSISTANT MANAGING EDITOR, FORTUNE: Well, it's interesting. What's as interesting as what Bernanke did say today is what he didn't say, which is, with the committee said, which is the Fed was widely expected or hoped by the portion of the market that he would do another round of bond buying and intervention -- what's it done twice already.

And that's sort of the salvation from above that the market was hoping for. And that didn't happen.

On the other hand, the Fed basically came out -- as Diane said -- a clear statement, for the first time, put a target date on how long it's going to keep interest rates, the target rate towards zero. And I think that, you know, led to a kind of collective sigh of relief. OK. We know we can expect interest rates for the foreseeable future.

The other thing is that I think the fact that the Fed didn't do the massive intervention maybe led people to think, OK, maybe it's not that bad. That's sort of the last thing that it could have done. And Bernanke has said in the past that things -- wages have to be falling really fast and prices have to be falling significantly for the Fed to go and do that again. And it didn't. So, maybe things could be worse. And I think the market took that as a sigh of relief.

MORGAN: Carmen Wong Ulrich, it's been a roll coaster few weeks now. What is the overview here? Where is the American economy in reality? Cut for all the Washington political speech here. Where do you think we actually are?

CARMEN WONG ULRICH, FINANCE EXPERT: Well, the thing is that for those who have been saying, you know, be calm, carry on -- through all of this -- you know, feel a little bit of "I told you so" today.

Here's the thing. Markets do what markets do, which is go up and down. But for regular American consumers, for folks who invest in 401(k)s, this is not the time to panic.

But there's a real crisis of confidence here. The American consumer is not where they should be or where they want to be right now. And they've taken all of this mess really to heart and they're saying we are not confident this economy is going to get better any time soon.

And that's very dangerous because what you're talking about is consumer spending is 70 percent of this American economy -- and consumer confidence and consumer spending do a dance together. And when one dips, the other goes down. And that's what's going to happen, which means less growth in the economy, that means corporations are not going to be hiring. It means job numbers are not going to improve.

And until job numbers improve, the American people are not going to feel better and feel confident in this economy?

MORGAN: I want to put all three of you on the spot here and ask you: where should the average American put their money now. I'm going to start with you, Diane. You can only answer less than 10 words. Where should an American put their money right now?

SWONK: Well, I'm not an advisor, an investment advisor. I still bet long on the U.S. economy and U.S. equities. So, I'm long in the stock market. And we're seeing the opportunities in the stock market to do a double dip. When they dip, they do allow us to double down.

That wasn't 10 words.

MORGAN: So, you would buy -- which kinds of stock? You've used way past your limit but what kind of stocks quickly?

SWONK: I'm still very bullish on exports and multinationals, manufacturers and that sector.

MORGAN: OK. Leigh Gallagher, can we try the 10-word rule with you?

GALLAGHER: I'll try. I'm an editor. So, it might work.

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GALLAGHER: I would agree with Diane. I think that the worst thing you want to do -- all right this already seven -- is to you pull out, because then you have to be right twice. You have to be right when you pull it out right and then you have to be right when you put your money back in.

So, I think equities are still, you know, a long-term thing. You have to think for the long term though, you absolutely have to.

MORGAN: And, Carmen, I mean, I would be tempted to shove it in a bag under my mattress at the moment. Are you heading that way? Is gold an option? Are you still sticking to treasury bonds? Where are you going?

ULRICH: No, no. When folks start talking about mattresses, it's actually when there's a bargain sale going on and you probably should be buying more. In my 10 words or less, it's -- consider time frame, know where your money is, and calm your stomach.

Was that 11?

MORGAN: I think you actually did that in under 10 words. That was good.

GALLAGHER: It sounded like a haiku.

MORGAN: Very impressive.

ULRICH: I'm a former editor, too.

MORGAN: Ladies, thank you very much.

SWONK: Thanks. GALLAGHER: Thank you.

ULRICH: Thank you.

MORGAN: All right. Representative Barney Frank is ranking member of the House Financial Services Committee. And he says that it's time for President Obama to face up to liberals over budget cuts.

And Barney Frank joins me now.

Mr. Frank, thank you for joining me. What did you make of a Fed statement today?

REP. BARNEY FRANK (D), MASSACHUSETTS: Well, I think it was appropriate. I think Mr. Bernanke and his colleagues have been doing the right thing, which is to the extent they can, offsetting some of the negative tendencies.

In fact, it's interesting that Ben Bernanke, a George Bush appointee originally, warned Congress not to do too much cutting in the short term, the last time he testified. He said we've got a longer term deficit problems. He said, look, we have a longer term, deficit problem and you've got to deal with that. In the short term, these cuts that you're talking about, he said they were headwinds against the economy.

So, the thing now, I think, is he's doing everything he can. But we need to do now something on the fiscal front. And I think it is now overwhelming, Piers, that we're going to borrow from your country's history.

The late '40s, Clement Atlee was prime minister. He called Harry Truman and said, look, I am facing a terrible economic crisis post- war. I cannot continue the international efforts to maintain the British remnants of empire. If you want to do it, fine.

The time has come for us to recognize the terrible crisis here with the economy and to withdraw from Iraq, withdraw from Afghanistan, tell our good friends in Europe that the Cold War was long since over. They are well able to defend themselves. It is time for us to substantially reduce our worldwide military commitment, put some of that to deficit reduction on the longer term, but spend some of it immediately to help state and local governments recover the employment they've lost, to get some construction done.

The notion that they've come in the situation, and the same time, the president has talked about staying in Iraq longer than George Bush wanted frankly appalls me. And I think the time has come -- people say, you got to get real. You got to understand some constraints.

Well, the biggest single area where we can do that is to cut, I believe, $200 billion a year on our military expenditures which go not for our own security but for our role as a kind of worldwide policemen. You know, almost all of our allies, our wealthy allies, spent far less as a percentage of that product that we do on the military. The time has come for us to recognize that we can't afford to do that and I believe we'll suffer no loss. We will suffer no loss in security.

MORGAN: An interesting point because the trouble being that the world's policemen, as America has been for the 50, 60 years, it's a lonely place and you end up as America found itself now getting hardly any credit from anybody.

FRANK: Oh, absolutely.

MORGAN: If the expenditure you're laying out is so vast, there is a pretty good argument to say, you know what? As the Chinese do, for example, look out for number one here and bring it all back to America.

FRANK: Well, (INAUDIBLE) South Korea needs help against that nuclear-armed lunatic. Israel is in a difficult situation, they never asked us for troops.

But Western Europe -- you know, when Harry Truman went into Western Europe, the countries there were poor, they were devastated by World War II, they faced Stalin. It was a very good thing to go in.

But we are still protecting Western Europe from I don't know what and they are well able to do it themselves. We're building -- I guess because of Cold War hangovers a missile defense system in Poland and in the Czech Republic that nobody needs.

So, yes -- and as you said, you wind up worse off politically. I'm not talking about America being anything less than the strongest nation in the world. But the world doesn't need a policeman as much as we do. And secondly, it's a very hard thing to do.

So, let's begin with Iraq and Afghanistan. We have accomplished whatever purpose we could have had originally with Osama bin Laden. We never should have been in Iraq.

And, by the way, the Pentagon budget is $700 billion a year. Medicare, which people want to blame, I think, unfairly, for the crisis, costs $580 billion a year.

We can with no loss in our own security scale back. And you cannot say on one hand America has to recognize constraints, but then act as if it's still 1960 and we can spend whatever we want when ever we want all over the world.

MORGAN: The devil's advocate position is that if you look at Afghanistan, the reason that al Qaeda was able to ferment its operation there was precisely because no one was there keeping an eye on it. I guess the counterargument to what you're saying is there are lots of areas in the world that were unstable where if America reduced any presence, you could see that situation recurring.

FRANK: Exactly. MORGAN: And that in itself, that would provide a -- yes, but that would an attack to American national security in the homeland potentially.

FRANK: Except if you don't -- if we shut it down in Afghanistan, then they're in Yemen. If you shut down in Yemen, they're in Somalia or they're in Sudan. We can't plug every rat hole in the world.

Now, we did do with significant amount against al Qaeda. And remember, in Afghanistan, major battle now is with the Taliban. George Bush became president. The Taliban was running Afghanistan. They were destroying Buddhist statues, and were mistreating people. They were outrageous.

But America can't be the one that solves every wrong in the world. If we did, we'd go out and shoot Mugabe, who's a terrible abuser of people and others.

In terms of national security, we dealt with al Qaeda, we have killed Osama bin Laden. We can protect ourselves back home. And if you look at the $120 billion we're spending in Afghanistan, plus the billions that I think we're wasting and the Pakistanis who are playing a great double game, a small percentage of that use back home would make us more secure than what's happening in Afghanistan.

MORGAN: Congressman Frank, thank you very much.

FRANK: Thank you, Piers.

MORGAN: The wild gyrations in the markets are a problem, not just in this country but around the world.

Joining me now is James Fallows, national correspondent for "The Atlantic," who surprisingly says that China may be on America's side in all of this.

James, interesting position you're taking because if you listen to some like Donald Trump, I mean, he foams at the mouth at the mere mention of the word China. He believes they're an enemy to the American national interest.

Why do you believe that they may be a friend?

JAMES FALLOWS, NATIONAL CORRESPONDENT, THE ATLANTIC: I think -- I was talking about the immediate crisis, the financial crisis going on now despite all of the bombasts coming from the Chinese side about how America needs to pull up the socks and behave better and similar bombasts in the U.S. side, fundamentally, their interests are the same as ours at the moment.

The two big threats to the Chinese economy are: number one, they won't be able to sell things to a largely American market. So another recession here would hurt them. And, second, that their extensive holdings in the U.S. treasuries and U.S. dollars will be at risk. So, for the time being, their interests like ours are avoiding recession and having some kind calm return to both U.S., the U.S. economy and U.S. financial markets.

MORGAN: Secretary Geithner spoke to Vice Premier Wang today. How do you imagine that conversation went?

FALLOWS: I would imagine it would be a little different from the public discourse. The editorials in the Chinese state papers for the last couple of days have been strong on the finger pointing at the U.S. for all of its bad behavior. But I imagine that these two financiers from major countries got past that. And I would imagine, the main concern of the Chinese side would be what the U.S. was planning to do, what weapons were still in the financial arsenal to calm things down in the U.S. and, therefore, world markets and to avoid the onset of another recession.

Probably the thing that the Chinese fear the most is the same thing the Obama administration and most Americans fear, which is another plunge back into greater unemployment and slowing economic activity. That's the threat to them as well.

MORGAN: Is it healthy or unhealthy that China holds so much of the American debt right now?

FALLOWS: It's a "compared to what" question. I think, fundamentally, it's unhealthy for both economies and they've been distorted in their relationship with each other to the degree they have been, for the last 15 years, at least -- especially the last 10. China has depended on the U.S. market to provide demand for their own factories, all of the peasants going to the cities and having manufacturing jobs.

At the same way, Americans have depended these last 10 years and having the low-cost goods from Chinese suppliers -- the Chinese surplus being invested here or lent here to keep our tax rates down and to keep our mortgage rates down. In the long run, it's not wholesome for either country, in the short run, it' been beneficial to both. And we're going to be uncomfortable on both sides process and trying to redress the balance -- less reliance on borrowing here, less reliance on over-exporting there.

MORGAN: I worked in America and China. And it seems to me the fundamental business practice difference is in bureaucracy. You know, things in China get done quickly without the mountain of red tape. Everything in America now seems consumed by.

Is it time for America Incorporated to revisit this whole area, do you think?

FALLOWS: Well, there are aspects of China's performance which are more and less impressive when you're there. There are certainly things whether it's the Beijing Olympics or the high speed rail project, which obviously is now a sort of double edge situation that the Chinese can get done with great speed that they want.

But I think the recent tragedies in the high-speed rail projects, the fatal crash and the evidence of corruption suggests that the Chinese approach has its problems, too. There's a lot of un- coordination at the regional level and there's been this huge overhang of these white elephant projects that have kept demand up going in a short run. But you rode to these remote cities and there are giant airports, giant shopping malls with nobody in them.

So, I think that the Chinese approach has its advantages. But it can be romanticized from the -- out of our frustration with the bureaucracies in the U.S.

MORGAN: James Fallows, thank you very much.

FALLOWS: My pleasure, thank you.

Coming up: London calling 16,000 police on the streets. Can they restore order?

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UNIDENTIFIED MALE: Seriously putting people's lives at risk.

UNIDENTIFEID FEMALE: I can't believe this is happening.

UNIDENTIFIED FEMALE: You know, I'm going to give out some extreme views, but I think they should bring the army down, show these people what real guns and real bullets are all about.

This has got nothing to do with anything that happened last week. This is just opportunists that are breaking in to shops and taking what they can. They're doing what they do best and that's stealing.

(END VIDEO CLIPS)

MORGAN: Sixteen thousand police on the streets of London tonight, more than twice as many as last night. Will that be enough to stop the riots, looting, and general mayhem? Not just there, but other British cities.

Dan Rivers is there for us now.

Dan, what's the latest from London tonight?

DAN RIVERS, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, the police are all over this area of east London, Piers. They just all pulled up this way. I don't know if there's another incident happening down there. But they have flooded this area of Tottenham, 16,000 across the city.

But from what we've been seeing, this sort of been yet of the disturbances. For a minute this evening, there has been a slightest inclination of any kind of trouble, they have come down like a ton of bricks, any kind of back chat from any of the young kids around here, immediately, they're taken into the vans. There's a lot of stop and search going on as well.

It's completely different to the terrible scenes last night 24 hours ago in London when there were buildings burning out of control. We were down in Peckham and really, really felt very threatened down there as things got really very volatile indeed.

MORGAN: The catalyst was the shooting of a young black man in north London. Interestingly, today, the police withdrew their initial claim that he had opened fire on them, although their early findings say that this guy, Mark Duggan, did have a loaded firearm when he was shot.

What is your understanding of where are in that investigation?

RIVERS: Well, we still haven't gotten a complete picture of the IPCC. What we know is that this guy, Mark Duggan, supposedly had a firearm on him. It wasn't discharged. The police fired two shots. He was hit in the chest and in the arm.

Beyond that, we haven't gotten a particularly clear picture at all.

So, you know, that -- that was obviously the spark, Piers, in all of this. But, you know, this snowballed way beyond that particular incident to be something much, much bigger.

We're getting reports right now of disturbances up in Manchester, Birmingham, Bristol was affected yesterday. It became something much bigger and it's not necessarily something that was racially oriented either. There's all sorts of different sorts of people that got involved in this. Not from one particular area of London even, not from one particular city. And even quite wide range of ages as well, in fact.

MORGAN: It was a very interesting thing to observe from afar. But having been in Britain, it's obviously -- it's a multicultural place. As I've seen these groups of gangs, a lot of them, you've got a white face, or a black face. I don't think it's a race thing at all.

What do you think is driving this? There's a lot of anger in Britain amongst law abiding people saying these are a bunch of yobs (ph) out of control seizing this incident to try to create mayhem. Is there something deeper though? Is there a social malaise that has created an underclass of kids who feel they got no education, no hope of getting a job, and this is the tinderbox, if you like, being lit to a deeper problem?

RIVERS: Yes, I think that's fair. I mean, you know, firstly and frankly, yes, there's been massive amounts of opportunistic of copy cat crime of people down in Peckham going -- well, if they're doing this up in Tottenham, we can do this as well. You know? And people here are saying, if they can do it over in Peckham, then we can do it as well.

A lot of people are taking the opportunity thinking, well, the police have got their hands tied there. They can't do anything. People realize that they can't do anything. And therefore, they took the opportunities going to help themselves in a free TV from a local store.

But underneath all that is definitely an issue of a whole generation of people who feel that there are no jobs, there are no opportunities. They've been failed, they feel, by the school system, by society at large, but a lot of jobs and so on. And they feel that this is their chance to frankly let of a bit of steam.

MORGAN: Dan Rivers, thank you very much.

Coming up: market turmoil, battles with Congress. It's a bad time to be president of the United States. I'll ask two men who know the White House better than most, Dan Rather and Douglas Brinkley -- how is President Obama doing?

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MORGAN: President Obama in a solemn moment at Dover Air Force Base today with the remains of 30 American troops who returned from Afghanistan. It's a tough time all around for the president.

And, now, I want to bring two men who have seen the White House up close. Dan Rather, and anchor and managing editor of "Ran Rather Reports" on HDNet. "Dan Rather Remembers," airs on HD Net on September 11th. Also joining me, presidential historian Douglas Brinkley.

Dan Rather, let me start with you. It's a pretty dismal time for America and for Americans right now. Put it in historical context from all that you reported on over the years. How bad is it, do you think, right now?

DAN RATHER, HD NET ANCHOR: Well, clearly the news is grim on a lot of fronts, the economy being first and foremost. And I would say within that jobs. But, you know, I'm an optimist by experience and by nature and by covering America over -- well over a half a century.

This country has tremendous resilience. People are angry. They don't feel they're being particularly well led by Republicans or Democrats. But through everything from Valley Forge through the Civil War, through the resignation of President Nixon, America bounces back.

I wrote something for Facebook and Twitter today along the lines of it may be that the world has overestimated the United States for its military and economic power ever since the end of World War II. It may not be such a bad thing now that the world is beginning to underestimate us.

Because this country will be back. It will be back strong and bold. But people are absolutely angry. If you saw the poll today, I've never seen a poll like that. Not that I'm a great believer in polls. But 59 percent of those polled indicated they were dissatisfied with the Republican party. That's an exceptionally high number. Also, 49 percent of them said they were dissatisfied with their local congressman.

That hasn't happened before in my lifetime. MORGAN: Doug Brinkley, I guess the thing everyone is waiting for is a great master plan from the president. If you think back to previous cries facing America, you know, FDR had the New Deal. Truman had the Marshall Plan. JFK took America to the Moon.

What is the Obama master plan? Do you see any sign of what it could be, which will rejuvenate America and Americans?

DOUGLAS BRINKLEY, PRESIDENTIAL HISTORIAN: Well, if I were going to dub this era something, I would call it generation downsize. Companies are downsizing. Universities are downsizing. And President Obama happens to be in the White House when he has to downsize.

It's hard to get people enthralled with cuts. Young people aren't going to be coming in busses to the Obama library some day, presidential library, to see the pen where he slashed some government programs.

So he -- the bigger question is what does Obama stand for? Most people when they elected thought he was a part of a continuum of progressivism. "Yes we can" was this idea we are going to do great new things in the future.

He's kind of having a summer of malaise right now. And I believe the president has to turn it around with, as Dan said, jobs this fall. He's going to have to get that trend line -- unemployment at nine percent is unacceptable for a president looking for re-election.

He's basically right now positioned himself fairly well as saying vote for me because behind me are crazies. But that's hardly a position you want to be on running -- you want to be optimistic and for something. He's going to have to present a big jobs plan this fall to show that he's really taking this unemployment issue seriously.

MORGAN: In terms of the jobs, everyone agrees needs to be done, what would you say, Doug Brinkley, should be at the basis of any such plan? How do you get Americans back to work?

BRINKLEY: I think you're going to have to put a jobs plan, and fight Congress on it, in which we deal with what some people would call the Smart Grid or a green grid. You see pieces of this in the Obama administration, meaning why does China have such a great transit system when we don't? Can you link Seattle to Los Angeles with a new train system and put people to work?

Do we now close bases in say Germany and say, we've won the Cold War. Do we need NATO American bases in Germany? And perhaps build bases for security here at home in Twenty Palms, California, for example.

Can we take BLM lands and do wind farms, new solar farms on government property? But this all has to come from the president. He has to believe this. Right now, he has kept the base at bay. But there's some deflation of the base going on right now. And without this sort of visionary -- you know, a great American future rollout of jobs, his presidency could be in peril.

MORGAN: When we come back, I want to talk to you both about the president's chances of being re-elected next year.

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MORGAN: Back now with my guests Dan Rather and Douglas Brinkley. Dan, obviously, big year next year, presidential year. What are Obama's chances right now, do you think?

RATHER: I would say his chances right now are 50-50 at best, maybe trending that line down. What you and I know, Piers, and what Brinkley knows so well is overnight is a long time in politics. A week is forever. We're talking about an election that's still well over a year away.

Clearly at this moment, Mitt Romney is the lead and most likely Republican candidate, although I certainly would not underestimate Michele Bachmann. A lot of people make fun of her. I think no way. I'm not in that category.

But so much depends on whom the Republicans put up. and I come back to it, whether the unemployment line trends downward or not. So with President Obama, I say he has time to recapture the narrative of his presidency, convince the American people, which he has not yet done, that he understands that it's not the deficit that's at issue here.

It's not the ceiling on the debt. It's jobs. If he takes the attitude and convinces people that when his feet hit the floor every morning, he's thinking about jobs, jobs, jobs, then he's certainly got a chance to be re-elected.

MORGAN: Doug Brinkley, do you agree, 50/50 at best for the president to be reelected?

BRINKLEY: I think 50/50. But I would go a little bit different than Dan. I think he's got better odds than that. I also think Rick Perry is the heavyweight for the Republican party right now.

But the president is not running against Romney or Perry. He' going to be running against the economy. And it all is going to matter next year at this time, if we reconvened, are we better off than we were at this point? Meaning, is unemployment down to eight point, not nine point?

But the president has an advantage to the meltdown this summer, in that it happened now, not next summer. It gives him a year to kind of show that he's doing things with the economy.

When we say do with economy, we're talking about winding down the wars in Afghanistan and Iraq. What can he do as president with China? Can we get some of our debt with China forgiven if we -- if they accept inflated dollars. All of these are possibilities for Obama in the coming year. But the Democrats are fairly unified and the Republicans have a split. It's not hard to see with this new commission getting, you know, a Tea Party person like Tancredo out of Colorado forming a third party movement, a Tea Party third party, which would destroy the Republican party.

You don't have a breakaway like that in Obama. You don't have like Jimmy Carter faced in 1980, the liberal Ted Kennedy wing bolting. So President Obama has kept his -- if he can keep his base together, which I believe he will, I think his chances for re-election look good.

MORGAN: Dan, you have a 9/11 special coming up. I'm sure there will be many others as well. It's a decade on from the terrible day. Obviously, American policy has been dramatically affected by the events of that day. Do you think America ten years on is in a better or worse place?

RATHER: I think we're better of in this regard, Piers -- and sometimes I can't imagine it's been ten years, because I think about it almost every day. I think we're better off in that we understand now, in the shadow of 9/11 -- and we're still in the shadow of 9/11 -- that we're not invulnerable. I think we also understand that the insularity that had been bred into all of us, partly by our prosperity, partly by our complacency, it hasn't disappeared, but it's been reduced.

So in those regards, I think we are better off than we were before. We're more realistic. We're more, if you want to call it that, pragmatic with both foreign policy, military policy, almost all other policies.

In terms of our economy, we're clearly not as well as we were. At least some of that can be traced to what has happened in the wake of 9/11. Wars in Afghanistan and Iraq being obvious ones.

So it's mixed. But I will say that we're different today, a lot different than we were in -- on September 11th. That Hawthorne in the early stages of our country wrote -- he said, you know, "time passes over us -- flies over us. But the shadows remain."

For the president in the foreseeable future, we live in the shadow of what happens that clear and terrible day.

MORGAN: We certainly do. Dan Rather, Doug Brinkley, thank you both very much.

OBAMA: T. Boone Pickens made his fortune in the oil business -- I don't think anyone would consider him unfriendly to drilling -- was right when he said that this is one emergency we can't drill our way out of.

(END VIDEO CLIP)

MORGAN: That was President Obama giving a shout out to my guest back in March. T. Boone Pickens says the J.R. Ewing of American businessman, a man who says he's thankful for the Tea Party and who says the trouble in Washington is a lack of leadership.

Boone Pickens joins me now. Boone Pickens, I don't know whether you like being called J.R. Ewing there or not. But certainly needs a little bit of J.R. action doesn't it, right now?

T. BOONE PICKENS, OIL MAGNATE: We need action, no question. If I was asked my opinion by the White House, I would say get on your own resources, because we have resources in America. And every day, we're spending a billion, 200 million dollars for foreign oil. And totally unnecessary. Get on our own resources. Get off of foreign oil. Creates a tremendous amount of jobs. It would be good.

MORGAN: But you have a vested interest in that. Obviously, you have a company which is the alternative to oil, many would say. Do you feel slightly compromised when you stand up for something that would help your business like that?

PICKENS: When you say I'm in the business -- of course, I'm a geologist and I've been in the business since I got out of school in 1951. I've been in the oil and gas business. But actually, the business I'm in would be clean energy fuels. And clean energy fuels does better with a low price for natural gas. Not a high price.

I'm not a natural gas producer. I have very little natural gas. But I do -- I'm a stockholder in clean energy fuels.

MORGAN: What I'm fascinated by you is you build a billion dollar business by having big ideas and taking big decisions.

Right now, when you look at America Incorporated, as a business, what are the big decisions that you think need to be taken? Put aside energy for a moment. How should President Obama get this great country back being great again?

PICKENS: Well, I was disappointed in Congress when they struggled to make a decision and finally came up -- they had been told by S&P that four trillion -- it was going to take a four trillion dollars cut in spending. They came up with a kind of a questionable one trillion. And I don't think anybody should have been surprised. S&P gave them full notice of what they wanted to do.

We should have cut spending more is what we should have done. That is absolutely necessary. And so here we are. They came up with a trillion dollar cut in spending, left for vacation, which I thought was unusual. I would have hung around to see what the results were going to be, and how the market interpreted that.

And the market didn't like it. So now you're down 500 points in two days on the market. And they're on vacation. I don't know. I think that -- what would I do? Well, the first thing, you know, you say, well, let's get some jobs out of this. I'm not -- the jobs are not created by the government. The jobs are created by industries in America.

And so you need to pull away some of the regulations on them, let them get to work. For instance, in the Gulf of Mexico, get back to drilling in the Gulf of Mexico. And there's just so many things we could do. But put it on the private sector. The government doesn't need to develop jobs. Those jobs are not our best jobs anyway.

MORGAN: We're going to have a little break here, Boone. When we come back, we'll talk to you about China and whether you see it as America's friend or foe.

(COMMERCIAL BREAK)

MORGAN: Back now with my guest T. Boone Pickens. Boone, what do you make of China? Donald Trump says they're the enemy. I've had other guests tonight saying they're potential friends. Where do you sit?

PICKENS: Well, I think they're a competitor. Enemy? I don't think so. But, you know, we have the most developed military any place in the world. We have 12 aircraft carriers. There's not another aircraft carrier in the world, but the Chinese are building a state of the art aircraft carrier.

So what am I saying? I think that we -- we're not -- we don't look like -- we don't have the same structure as any other country. And I don't understand. We could get our people out of the Mideast. I don't like all of our military in Europe, for instance, 50,000 people.

I think we come home and start to look at our overall picture more clearly and decide how we're going to spend our money. Because we have got to cut down on the 14 trillion dollars in debt. Now that is not going to work. And we've had an early warning from the S&P on that. And I think everybody understands that we have got to cut spending.

So here the most subsidized resource in America is foreign oil. And so we don't have to do that, because we have resources in America to use. We have plenty of oil. We have plenty of natural gas. We can go for the real -- more expensive, but we need to start to get into the development of wind and solar. Not a large part of our spending, but we should start to move in the direction of those renewable fuels.

There's so much we could do here, and bring our people back home. I really -- the Afghan war just breaks my heart to see people killed there every day. And I do not understand what we're going to get out of that war. I know we don't ever win. I really don't think we ever win. And so why are we there? Why do we get 30 people killed there over the weekend? I just don't like it.

MORGAN: Finally, who do you have in your eye to be the Republican candidate that may take on President Obama in the election next year?

PICKENS: I don't know. I mean, our governor from Texas, Rick Perry, is going to announce in the next few days. And -- but, you know, I know all those people and friends with all of them. But I -- you know, you'd have to say -- I don't know Michele Bachmann. I don't know her. I know Sarah Palin, I know Jon Huntsman. I know Newt. I know all those men and women.

They'll come up with somebody. I think, just from my standpoint, the reading I do and all, that it's probably going to come down to Mitt Romney and Rick Perry. But I'm not an expert on that.

MORGAN: Well, it will be a fascinating year. T. Boone Pickens, thank you very much.

PICKENS: Sure. Thank you.

MORGAN: That's all for us tonight. Here's Anderson Cooper with "AC 360."